Apple Inc. – on Tuesday – reported its earnings, which was in-line with the estimates, and revenue outperformed the analysts ‘estimates. However, iPhone sales declined for the third straight quarter. At a time, when all are focusing on the iPhone sales, Cramer is focusing on a different segment.
What is Wall Street missing about Apple’s earnings?
Jim Cramer of Mad Money is of the view that the Wall Street is again ignoring the most important aspect of the revenue – the service revenue stream. Cramer, who maintained his view on Apple, said the stock is not to be traded but owned.
Cramer said, “To me, once again, the exceedingly profitable revenue stream is the one to watch, and it is still being relatively ignored, despite its 24 percent growth to $6.3 billion, and despite the naysayers comments.”
iPhone 7 and 7 Plus to sell well
Apple Inc. surged ahead of the earnings release with investors expecting that Samsung Firegate is going to help iPhone sales. Last year, the firm posted comparable sales of $51.5bn against $46.9bn this year. However, guidance should bring cheer to the investor as the company is expecting a slight increase in its iPhone sales compared to the last year in December, when it sold record 74.8m iPhones.
According to the analysts, consumers are interested in iPhone 7 and iPhone 7 Plus models launched recently. Apple CFO – Luca Maestri – told The Associated Press that company is upbeat about the momentum of iPhone 7 and iPhone 7 plus. Though Maestri did not reveal on how many iPhones the firm is expecting to sell, Piper Jaffray analyst Gene Munster is expecting around 78.5m iPhones to be sold this quarter.
Even though, iPhone 7 and 7 Plus is not a major change from iPhone 6 and 6 Plus, analyst Patrick Moorhead feels that the latest iPhone packs enough improvement such as a new camera system, extended battery life, and improved water proofing. Further, newer iPhone sales can pick up speed as consumers would want to switch to the newer version by replacing their two-year-old phones.
Apple still dependent on iPhone
BGC Partners analyst Colin Gillis raised concerns after the earnings report, saying Apple Inc. is still majorly dependent on the iPhone, which is facing stiff competition across the globe. Gillis said, “Counting phones is a horrible way to live and die every quarter.”
Apple Watch posted lukewarm sales ever since it was launched in 2015. Though, the Cupertino-based firm did not reveal the break up sales of the watch, IDC estimates that the firm sold 1.1m units last year. ‘Other Product’ revenue, which includes sales number of Apple Watch and the iPod dropped, fell 22% to $2.4bn in the July-September quarter.
On Tuesday, Apple shares closed up 0.51% at $118.25. Year to date, the stock is up over 10% while in the last one-year, it is down almost 1%.